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Product Category: Projects

Product Code: 00000912

No of Pages: 79

No of Chapters: 5

File Format: Microsoft Word

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The auditor’s independence is a veritable tool of the auditing profession, a crucial element of the statutory corporate reporting process and a key ingredient of the adding of value to an audited financial statement. Corporate performance is an important concept that relate to the ways and manner in which financial resources available to an organizational are judiciously used to achieved the overall corporate objectives of an organization. It keeps the organization in business and creates a greater prospect for future opportunity. The economic dependent resulting from the provision of non auditing services, the familiarity developed from lengthy auditor tenure and personnel relationship alumni employees have been alleged to contribute to this erosion of auditor’s independence. Thus, the main objective of this study is to examine the auditor’s independence and corporate performance. The study also attempts to determine the relationship between audit tenure and non audit service, and how corporate performance is measure. The data used in the study was generated from questionnaire distribution to auditors, financial manger, and academicians, In Edo, Delta, Lagos, Ondo, Ogun and Port Harcourt.


Title Page                                                                                         





Table of Contents         


CHAPTER ONE: INTRODUCTION                                           

1.1     Background to the Study                                                                 

1.2     Statement of Problem                                                             

1.3     Research Questions                                                                

1.4     Objectives of the Study                                                          

1.5     Statement of Hypothesis                                                        

1.6     Significance of the Study                                                                 

1.7     Scope of the Study                                                                 

1.8     Limitation of the Study                                                          

1.9     Definitions of Terms    


CHAPTER TWO: LITERATURE REVIEW                               

2.1     Introduction                                                                           

2.2     Expectations Gap                                                                            

2.3     Independence in Fact and Appearance                                   

2.4     Factors affecting Independence of the auditors                      

2.5     Non Audit Services (NAS)                                                     

2.6     Management Advisory System (MAS)                                   

2.7     Empirical Evidence of Reaction to Non-Audit Services         

2.8     Impact of Culture on Performance                                         

2.9     Corporate Performance                                                          

2.10   What is Performance?                                                            

2.11   Conceptual of Balance Scorecard        



3.1     Introduction                                                                           

3.2     Research Design                                                                     

3.3     Description of Population to the Study                                  

3.4     Sample Size                                                                            

3.5     Sampling Techniques                                                             

3.6     Sources of Data Collection                                                     

3.7     Method of Data Presentation                                                 

3.8     Method of Data Analysis        




4.1     Introduction                                                                           

4.2     Presentation of Data                                                               

4.3     Data Analysis                                                                         

4.4     Hypotheses Testing       



AND RECOMMENDATIONS                                                      

5.1     Introduction                                                                           

5.2     Summary of Findings                                                             

5.3     Conclusion                                                                             

5.4     Recommendations                                                                            





1.1     Background to the Study

The auditor’s independence is a cornerstone of the auditing profession. A crucial clement in the statutory corporate reporting process and a key prerequisite for the adding of value to an audited financial statement (Mautz & Sharaf, 2003). In a general sense, auditor’s independence has borne a relationship to the prevailing commercial environment in different time periods. Independence is a state of the mind characterize by objectivity and integrity on the part of the auditors. It implies the performance of auditors work without being biased and avoiding undue influence.

Corporate performance is the final results of all activities. It evaluate performance, the emphasis is on assessing the current behavior of the organization in respect of its efficiency and effectiveness. Corporate performance is an important concept that relates to the way and manner in which financial resources available to an organization are judiciously used to achieve the overall corporate objective of an organization; it keep the organization in business and create a greater prospect for future opportunities.

The provision of non audit services by audit firms does not necessarily influence the independence of auditors as other writers have said. However, where the fees generated from such non audit services are considerably high (in proportion to the audit fees earned by such accounting firms and insufficient safeguard operates to protect the auditor independence. This create a situation whereby the auditors independence is likely to be compromised since the auditor may be denied inscriptive contracts (in the form of fees generated from NAS) where he decides to give a qualified opinion on the financial statement being audited.

There are number of performance measurement tools, which could be clubbed into broad groups like (A) traditional measures (B) non-traditional measures. Traditional measures which indicate the financial strength, weakness, opportunities and threats and return on investment (ROL), Residual income (RI), etc but it is found that some users of financial statement are interested on non-financial performance. In some case, some non-traditional measurement tools are to be used like economic value added. Balance scorecard, etc in the long run, if any area is either were emphasized, performance evaluation by the auditors will become unbalance. In this way, the aim of the concept is to establish a set of measure both financial and non-financial through which a company can control its activities and balance various measures to effectively track performance.

1.2     Statement of Problem

Auditors’ independence is one of the most important issues in accounting practice today. Independence increases the effectiveness of the audit by providing assurance that the auditor will plan and execute the audit objectively. Because of the importance of auditors’ independence to audit quality performance in an organization, the security and exchange commission (SEC) has engaged in substantial rule making in this area without a conceptual framework. In the wake of the recent corporate performance around the globe, attention has been drawn to the issues of auditors having market based institutional incentives to act independently in protecting their reputation and independent (Zmijwski, 2003). The question of whether auditors’ independence, organizational culture and mechanism on governance have an impact on corporate performance has been the subject of much debate and research. Auditors’ independence is an essential feature of an efficient capital market. Managers have incentives to reduce agency costs in the firm by hiring independent auditors (Jenson & Meckling, 2006). Typically, the accusation made, that auditors have allowed inappropriate accounting treatment which therefore affects their independence by the non audit fees payable to them. The problems inherent in these study are those auditors who may become too close to the company they are auditing or because their objectivity may be challenged due to reliance on income from a single source.

1.3     Research Questions

In the light of the foregoing the following research questions are raised.

1.       Does corporate governance positively affects corporate performance?

2.       Does the effectiveness of auditor’s independence on corporate governance have impact on listed firms in the Nigerian Stock Exchange?

3.       What is the relationship between Audit Firm Tenure and The Provision of non Audit Service?

4.       Does provision of non audit services have a significant impact on auditors’ independence?

5.       Does the financial statement of the listed firms in the Nigerian Stock Exchange have any impact on corporate governance?

1.4     Objective of the Study

The aim of this study is to empirically examine the auditors’ independence and corporate performance in Nigeria. The study attempted to achieve the following objectives.

1.       To find out if corporate governance positively affects corporate performance.

2.       To examine the effectiveness on auditor’s independence on corporate governance of the listed firms in the Nigerian Stock Exchange.

3.       To determine the relationship between Audit. Firm Tenure and the provision of non audit services.

4.       To find out if the provision of non audit services have significant impact on auditors’ independence.

5.       To assess the financial statement of the listed firms in the Nigerian Stock Exchange on corporate governance.

1.5     Statement of Hypotheses

The following hypothesis was stated.

Hypothesis One

HO:    There is no positive relationship between audit firm tenure and the provision of non audit services in Nigeria.

HI:    There is a positive relationship between audit firm tenure and the provision of non audit services in Nigeria.  

Hypothesis Two

HO:    There is no significant relationship between auditor’s independence and corporate governance.

HI:    There is a significant relationship between auditor’s independence and corporate governance.

Hypothesis Three

HO:    There is no significance relationship between the financial statement of the listed firms in the Nigerian Stock Exchange and corporate governance.

HI:    There is a significance relationship between the financial statement of the listed firms in the Nigerian Stock Exchange and corporate governance.


1.6     Significance of the Study

This study is very significant, in that the result of the investigation would contribute to the current debate on the appropriateness or otherwise of audit firms providing non audit services to audit clients. Different users of financial statement would equally be aware of the inherent risk attributable to auditors providing non audit service. The study is significant in the following areas;

i.        Accountants: Professional accountants in the country will also benefit from the findings of the study because it will reveal the state and quality of the accounting and audit services they render to audit firms in Nigeria.

ii.       Government: The study is of significance to the Nigerian government and institutionalized financial regulators in the country because it will show where legislations needs to be made or modified to provide for more effective regulation of the business activities in the country.

iii.      Statutory Bodies: It is also to assess relevant provision by statutory bodies and standard on auditor’s independence and ascertain how credible it has been.


1.7     Scope of the Study

The focus of the subject matter in this research is the auditors’ Independence and corporate performance in the private sector. The geographical area used in the study includes Banks in Edo and Delta States.

1.8     Limitations of the Study

In the course of this research work, the following were the limitations, the process of respondent in some selected banks in Edo State, Delta State, Lagos State, Ondo State, Ogun State and some selected banks in Port Harcourt that were used limited the scope of this work. This is because it was only the perceptions of auditor’s and practicing accountant in those state measured above that were used. The selection process of respondent for the study was not completely random,; it was observed that some of the study was not completely random; it was observed that some of the respondents were reluctant in giving the invitation a pas. It is therefore not possible to ascertain the extent to which this attitude would have influenced the reliability of the information provided.

·                    The inability to obtain completely random sampling size.

·                    Respondents were too reluctant in giving information provided


1.9     Definition of Terms

Audit: The independent examination of/and expression of an opinion on the financial statement/ performance of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation.

Audit fees: Fees paid to a company’s auditors which are approved by the shareholders at an AGM.

Auditors Qualification: A form of words in a report from the auditors of a company’s account. Stating that in their opinion the accounts are not a true reflection of the company’s finance position.

Auditors Report: A report written by a company’s auditors after they have examined the accounts of the company.

Finance Statement: A document that shows the financial statement of a company.

Integrity: A state of honesty but with a wide range of qualities such as fairness, candour, courage, intellectual honesty and confidentiality.

Objectivity: A state of mind which excludes bias, prejudice and compromise and which gives fair and impartial consideration to all matter that are relevant to the present task, disregarding those that are not.

Non-audit services: All services provided by an auditor that are not considered as an audit.

Balance scorecard: Balance Scorecard is an organizational framework for implementing and managing strategy at all levels of an enterprise by linking objectives, initiatives and measures to an organization’s strategy.

Independence: Function of character with characteristics of integrity and trustworthiness being essential or the absence of interest that creates an unacceptable risk of bias.

Corporate performance: Is the outcome of the frame won effort during a specified period. An accomplishment of an organization. The past that can realistically be expected rather than what is desired.

Organizational culture: Is a specific collection of values and norms that are shared by people and groups in an organization and that control the ways they interact with each other and with stakeholders outside the organization.

Corporate Governance: Corporate governance involves a system by which governing institutions and other organization related to their communities and stakeholders to improve their quality of services rendered to their host communities and stakeholders. It is paramount that good corporate governance should ensure transparency, accountability and fairness in reporting information.

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